DO NOT OPEN THIS TEST BOOKLET UNTIL YOU ARE TOLD TO DO SO

VAJIRAM & RAVI

Prelims CAMP – 2025
Subject – Economics
Test - ET – 02
TEST BOOKLET
Time Allowed: One Hour Maximum Marks: 100

INSTRUCTIONS
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omission/discrepancy will render the Answer Sheet liable for rejection.
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DO NOT write anything else on the Test Booklet.
4. This Test Booklet contains 50 items (questions). Each item comprises four responses (answers). You
will select the response which you want to mark on the Answer Sheet. In case you feel that there is more
than one correct response, mark the response which you consider the best. In any case, choose ONLY
ONE response for each item.
5. You have to mark all your responses ONLY on the separate Answer Sheet provided. See directions in
the Answer Sheet.
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has concluded, you should hand over to the Invigilator only the Answer Sheet. You are permitted
to take this Test Booklet with you.
9. Penalty for wrong answers:
THERE WILL BE PENALTY FOR WRONG ANSWERS MARKED BY A CANDIDATE IN ALL THE
QUESTIONS.
i. There are four alternatives for the answer to every question. For each question for which a wrong
answer has been given by the candidate, one-third of the marks assigned to that question will be
deducted as penalty.
ii. If a candidate gives more than one answer, it will be treated as a wrong answer even if one of the
given answers happens to be correct and there will be same penalty as above to that question.
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DO NOT OPEN THIS TEST BOOKLET UNTIL YOU ARE TOLD TO DO SO

 VAJIRAM & RAVI
1. Consider the following scenario: 4. Which of the following economic variables will
A country is facing prolonged economic undergo a likely decline if the Reserve Bank of
stagnation despite extremely low interest rates. India (RBI) adopts a contractionary monetary
The central bank has reduced the nominal interest policy?
rate to near zero, yet there is no significant 1. Rate of inflation
increase in investment or consumer spending. 2. Aggregate demand
Savings remain high and monetary policy seems 3. Lending rates for borrowers
ineffective in stimulating the economy. This is the 4. Aggregate business investment
best description of: Select the correct answer using the code given below:
(a) Hyperinflation (a) 1, 2 and 4 only
(b) Liquidity trap (b) 1, 3 and 4 only
(c) Crowding out effect (c) 2, 3 and 4 only
(d) Demand-pull inflation (d) 2 and 3 only

2. With respect to the Reserve Bank of India (RBI), 5. Consider the following statements with reference
which of the following statements is/are correct? to the Non-Banking Financial Companies
(NBFCs) in India:
1. It was established on the recommendations
1.  They are registered under the Companies
of the Hilton-Young Commission, 1926.
Act, 1956.
2. Originally, RBI was privately owned but it
2. They accept only demand deposits but not
was nationalized in 1949.
time deposits.
3. 
It is responsible for keeping monetary
3.  All NBFCs must be registered with the
reserves with a view to securing monetary
Reserve Bank of India.
stability of the country.
Which of the statements given above is/are
Select the correct answer using the code given
correct?
below:
(a) 1 only
(a) 1 only
(b) 2 and 3 only
(b) 1 and 2 only
(c) 2 only
(c) 2 and 3 only
(d) 1, 2 and 3
(d) 1, 2 and 3
6. Consider the following statements:
3. In the context of monetary policy, the term 1. A person may refuse to accept the payment
‘Tapering’, refers to: through a limited legal tender money beyond
(a) increase in government spending to stimulate a certain limit.
demand 2. Coins are unlimited legal tender in India.
(b) reduction in interest rates to boost economic Which of the statements given above is/are
growth correct?
(c) withdrawal of high-denomination currency (a) 1 only
notes from circulation (b) 2 only
(d) strategy of the Central Bank for winding up a (c) Both 1 and 2
quantitative easing program (d) Neither 1 nor 2

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 VAJIRAM & RAVI
7. Consider the following statements: 10. An increase in the Reserve Deposit Ratio (RDR)
Statement-I: leads to:
The Reserve Bank of India (RBI) acts as the (a) increase in the money multiplier
‘lender of the last resort’. (b) decrease in the lendable resources of banks
Statement-II: (c) increase in the grant of loans by banks
The RBI comes to the rescue of a bank that faces (d) decrease in the borrowable resources of banks
temporary liquidity problems by supplying it with
11. Consider the following:
much-needed liquidity.
1. Crop loans for horticulture
Which one of the following is correct in respect of
2. Education loans
the above statements?
3. Social Infrastructure
(a) Both Statement–I and Statement–II are correct
4. Renewable energy projects
and Statement–II explains Statement–I
How many of the above are covered under the
(b) Both Statement–I and Statement–II are
‘Priority Sector Lending’ facility of banks in India?
correct, but Statement–II does not explain
(a) Only one
Statement–I
(b) Only two
(c) Statement–I is correct, but Statement–II is (c) Only three
incorrect (d) All four
(d) Statement–I is incorrect, but Statement–II is
correct 12. Which of the following assets are not included
under the Statutory Liquidity Ratio (SLR)?
8. In an economy, the money multiplier is usually 1. Government securities
lower than the deposit multiplier because: 2. Cash
(a) banks do not hold the reserves against the 3. Corporate bonds
deposits 4. Loans and advances
(b) banks do not lend all their reserves and 5. Equity shares
borrowers do not spend all their money Select the correct answer using the code given below:
(c) money multiplier assumes infinite money (a) 1 and 2 only
creation by banks (b) 3, 4 and 5 only
(d) central bank restricts the creation of new (c) 1, 2 and 5 only
deposits (d) 2, 3, 4 and 5 only

13. Consider the following statements with reference

9. With reference to the Central Bank Digital
to the Open Market Operations of the Reserve
Currency (CBDC), consider the following
Bank of India (RBI):
statements:
1. They are conducted by the RBI on behalf of
1. It is not accepted as a means of settling debts
the Government.
within the country.
2. Under outright open market operations, the
2. Each unit of the CBDC holds the same value
RBI buys the securities without any promise
and can be exchanged on a one-to-one basis.
to sell them later.
3. It is restricted to person-to-merchant (P2M)
3. Under the reverse repo agreement, the RBI
transfers.
promises to repurchase the securities.
How many of the above statements are correct?
Which of the statements given above are correct?
(a) Only one (a) 1 and 2 only
(b) Only two (b) 2 and 3 only
(c) All three (c) 1 and 3 only
(d) None (d) 1, 2 and 3
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Test - ET - 02 - Economics
 VAJIRAM & RAVI
14. Which one of the following statements is not 17. With reference to Capital to Risk (Weighted)
correct regarding the e-RUPI voucher? Assets Ratio (CRAR), consider the following
(a) It is a pre-paid digital tool that a beneficiary statements:
receives on the phone in the SMS or QR code. 1. It is a financial metric used to ensure that
(b) The beneficiary is not required to have a bank banks have sufficient capital to absorb
account to redeem it. potential losses and protect depositors’ funds.
(c) It does not require an internet connection for 2. It is decided by the Reserve Bank of India for
its operation. all financial institutions in India.
(d) It can only be used once regardless of whether 3. Its requirement is higher for banks in India
the entire amount of the voucher is redeemed than given in Basel III norms.
or not. Which of the statements given above are correct?
(a) 1 and 2 only
15. Consider the following statements with reference (b) 2 and 3 only
to the Margin requirement: (c) 1 and 3 only
1. It refers to the difference between market (d) 1, 2 and 3
value of the security offered for loans and the
amount of loans offered by the commercial 18. Consider the following statements regarding the
banks. Priority Sector Lending (PSL) in India:
2.  The Central Bank increases the margin 1.  It aims to promote inclusive growth and
requirement to reduce the credit capacity address the credit needs of marginalized
creation of the Commercial banks during sections of society.
excess demand for loans in the market. 2. Small Finance Bank (SFB) must lend at least
Which of the statements given above is/are correct? 60 percent of the adjusted net bank credit to
(a) 1 only the priority sector.
(b) 2 only 3. Individual farmers, regardless of their scale
(c) Both 1 and 2 of operations, qualify for classification under
(d) Neither 1 nor 2 PSL.
Which of the statements given above are correct?
16. Consider the following statements: (a) 1 and 2 only
Statement-I: (b) 2 and 3 only
Higher interest rates lead to a smaller speculative (c) 1 and 3 only
demand for money. (d) 1, 2 and 3
Statement-II:
At higher interest rates, people prefer to invest in 19. With reference to the Standing Deposit Facility
interest-earning assets rather than holding money. (SDF), consider the following statements:
Which one of the following is correct in respect of 1. It enables commercial banks to deposit their
the above statements? excess liquidity with the Central Bank with a
(a) Both Statement–I and Statement–II are correct minimum collateral requirement.
and Statement–II explains Statement–I 2. Access to SDF is available at the discretion
(b) Both Statement–I and Statement–II are of the Central Bank.
correct, but Statement–II does not explain Which of the statements given above is/are
Statement–I correct?
(c) Statement–I is correct, but Statement–II is (a) 1 only
incorrect (b) 2 only
(d) Statement–I is incorrect, but Statement–II is (c) Both 1 and 2
correct (d) Neither 1 nor 2

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 VAJIRAM & RAVI
20. The Reserve Bank of India (RBI) undertakes 23. Consider the following statements with reference
sterilization operations to: to the Varying Reserve Requirements:
(a) increase the money supply in the economy 1.  They are imposed on commercial banks
to regulate the money supply and credit
during a financial crisis
availability in an economy.
(b) neutralise the impact of its foreign exchange
2.  Changes in the reserve requirements have
operations on the domestic money supply less effect in the underdeveloped countries
(c) control inflation by directly fixing interest than in the more industrialized countries.
rates Which of the statements given above is/are correct?
(d) ensure foreign exchange reserves are not (a) 1 only
affected by fluctuations in the global market (b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
21. With reference to the Monetary Policy Committee
(MPC), consider the following statements: 24. Consider the following statements:
1. It was instituted by the Central Government Statement-I:
under the Reserve Bank of India (RBI) Act of Fiat money does not have intrinsic value like a
1934. gold or silver coin.
2. The Governor of the RBI acts as the ex officio Statement-II:
chairperson of the MPC. The purchasing power of fiat money is derived
from the relationship between supply and demand.
3. The Cabinet Secretary and Economic Affairs
Which one of the following is correct in respect of
Secretary are part of the Selection Committee
the above statements?
for the appointment of external members of (a) Both Statement–I and Statement–II are correct
the MPC. and Statement–II explains Statement–I
Which of the statements given above are correct? (b) Both Statement–I and Statement–II are
(a) 1 and 2 only correct, but Statement–II does not explain
(b) 2 and 3 only Statement–I
(c) 1 and 3 only (c) Statement–I is correct, but Statement–II is
incorrect
(d) 1, 2 and 3
(d) Statement–I is incorrect, but Statement–II is
correct
22. Consider the following statements regarding the
Regional Rural Banks (RRBs): 25. Consider the following statements with reference
1. They were set up under the provisions of the to the types of banking:
Banking Regulation Act, 1949. 1.  Under full-reserve banking, banks are
2. They offer banking and credit facilities both mandated to hold all money that they receive
as demand deposits from customers in their
in rural and semi-urban areas.
vaults at all times.
3. They cannot raise capital from sources other
2. Under fractional-reserve banking, banks can
than the Centre, States and sponsor banks. give loans from demand deposits.
Which of the statements given above is/are correct? Which of the statements given above is/are correct?
(a) 2 only (a) 1 only
(b) 2 and 3 only (b) 2 only
(c) 1 and 3 only (c) Both 1 and 2
(d) 1, 2 and 3 (d) Neither 1 nor 2

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 VAJIRAM & RAVI
26. With reference to the payment banks in India, 29. Consider the following statements with reference
consider the following statements: to the Marginal Standing Facility (MSF):
1. They can accept Recurring Deposits (RDs) 1. It is an overnight liquidity support scheme to
and any non-resident Indian deposits.
provide funds to the commercial banks.
2. They are required to maintain the Statutory
2. It is given at a higher interest rate over the
Liquidity Ratio (SLR) as per RBI regulations.
3. They are mandated to maintain half of their repo rate.
total branches in unbanked rural areas. 3. It cannot be used by a bank if it doesn’t have
Which of the statements given above is/are the required eligible securities above the
correct? Statutory Liquidity Ratio (SLR) limit.
(a) 1 and 2 only Which of the statements given above are correct?
(b) 2 only
(a) 1 and 2 only
(c) 1 and 3 only
(d) 1, 2 and 3 (b) 2 and 3 only
(c) 1 and 3 only
27. With reference to digital lending in India, consider (d) 1, 2 and 3
the following statements:
1. All loan repayments must be executed only
30. Which of the following would lead to injection of
between the Regulated Entities (REs) and the
liquidity in the economy?
borrowers’ bank accounts.
2. An increase in the credit limit of the loan 1. Purchase of Treasury Bills by the RBI
can be made by the RE without the explicit 2. The sale of foreign exchange by the RBI
consent of the borrower. Select the correct answer using the code given
3. First Loss Default Guarantee is allowed to below:
compensate lenders if the borrower defaults. (a) 1 only
Which of the statements given above is/are
(b) 2 only
correct?
(a) 1 and 2 only (c) Both 1 and 2
(b) 2 only (d) Neither 1 nor 2
(c) 1 and 3 only
(d) 1, 2 and 3 31. Which of the following statements is/are correct
regarding ‘Digital Banking Units (DBUs)’?
28. Consider the following statements with reference
1. They are set up by the Regional Rural Banks
to the Prompt Corrective Action:
1. It is a mechanism of the Reserve Bank of and Local Area Banks.
India (RBI). 2. They can offer both cash withdrawal and
2.  It does not extend to the Non-Banking deposit services.
Financial Companies (NBFCs). 3. They cannot undertake lending activities to
3.  It can be used to direct mandatory the Micro, Small and Medium Enterprises.
technological upgrades for banks.
Select the correct answer using the code given
Which of the statements given above is/are
below:
correct?
(a) 1 only (a) 1 and 2 only
(b) 2 and 3 only (b) 1 and 3 only
(c) 1 and 3 only (c) 2 only
(d) 3 only (d) 1, 2 and 3

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 VAJIRAM & RAVI
32. Consider the following statements with reference 34. In the context of the money supply in the economy,
to the control of credit: consider the following:
1. Deposits of the Government of the India with
1. In India, the Reserve Bank of India (RBI)
RBI
acts as the controller of credit. 2.  Deposits of the country’s banking system
2.  Regulation of margin requirements and with RBI
moral suasion can be undertaken to regulate 3. Balances in the accounts of foreign Central
banks
the volume of credit to select sectors of the
4. Deposits of multilateral institutions
economy.
How many of the above are included in the ‘Other
Which of the statements given above is/are Deposits’ of the Reserve Bank of India?
correct? (a) Only one
(b) Only two
(a) 1 only
(c) Only three
(b) 2 only (d) All four

(c) Both 1 and 2

35. Consider the following statements with reference
(d) Neither 1 nor 2 to the Urban Co-operative Banks (UCBs):
1. They operate in urban & semi-urban areas.
2. All the UCBs are under the direct supervision
33. Consider the following statements: of the Reserve Bank of India (RBI).
3. The Supervisory Action Framework (SAF)
Statement-I:
seeks to ensure expeditious resolution of
An increase in the velocity of money usually financial stress faced by the UCBs.
indicates an expansion of the economy. Which of the statements given above is/are
correct?
Statement-II: (a) 1 and 2 only
When there is a high velocity of circulation of (b) 2 and 3 only
money, the same amount of money is used for (c) 2 only
multiple transactions. (d) 1 and 3 only

Which one of the following is correct in respect of 36. With reference to the currency system in India,
the above statements? consider the following statements:
1. All banknotes issued by the Reserve Bank
(a) Both Statement–I and Statement–II are correct
of India (RBI) are backed by assets such as
and Statement–II explains Statement–I
gold, Government Securities and Foreign
(b) Both Statement–I and Statement–II are Currency Assets.
correct, but Statement–II does not explain 2. The RBI decides the value of banknotes to be
Statement–I printed in a year.
3. The RBI has the sole right to mint coins.
(c) Statement–I is correct, but Statement–II is Which of the statements given above are correct?
incorrect (a) 1 and 2 only
(b) 2 and 3 only
(d) Statement–I is incorrect, but Statement–II is
(c) 1 and 3 only
correct
(d) 1, 2 and 3

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Test - ET - 02 - Economics
 VAJIRAM & RAVI
37. Which of the following statements are correct with 39. Consider the following:
reference to the Asset Reconstruction Companies 1. Reserve Bank Innovation Hub
(ARC) in India?
2. Deposit Insurance and Credit Guarantee
1.  They are regulated by the Securities and Corporation of India (DICGC)
Exchange Board of India (SEBI). 3. National Housing Bank
2. A 100% Foreign Direct Investment is allowed 4. 
National Bank for Agriculture & Rural
in ARCs under the automatic route. Development (NABARD)
3. They are established under the Securitisation How many of the above are fully-owned
and Reconstruction of Financial Assets subsidiaries of the Reserve Bank of India?
and Enforcement of Security Interest (a) Only one
(SARFAESI) Act, 2002.
(b) Only two
Select the correct answer using the code given (c) Only three
below:
(d) All four
(a) 1 and 2 only
(b) 2 and 3 only 40. Which one of the following makes a
(c) 1 and 3 only recommendation for appointments of whole-time
directors of the public sector banks in India?
(d) 1, 2 and 3
(a) Indian Bank’s Association
(b) Financial Services Institution Bureau
38. Which of the following statements are correct with
(c) National Payments Corporation of India
respect to “Interest Coverage Ratio” of a firm?
(d) Reserve Bank of India
1. It indicates the ability of the borrower to
repay a loan.
41. Consider the following statements with reference
2. 
It is calculated by dividing a company’s
to the Prepaid Payment Instruments:
earnings before interest and taxes by the
company’s interest expenses for a given 1. 
The value stored on such instruments
period. represents the value paid for by the holder to
a bank account.
3. It depends on the state of the industry and
2. They can be issued as smart cards, paper
business cycle.
vouchers and mobile wallets.
Select the correct answer using the code given
Which of the statements given above is/are
below:
correct?
(a) 1 and 2 only
(a) 1 only
(b) 2 and 3 only (b) 2 only
(c) 1 and 3 only (c) Both 1 and 2
(d) 1, 2 and 3 (d) Neither 1 nor 2

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 VAJIRAM & RAVI
42. With reference to the banking system, the term 45. Consider the following statements with reference
‘Spread’ refers to: to the selective credit controls:
(a) the liabilities of the banks 1.  They are intended to both encourage or
(b) the profit that is appropriated by the banks discourage specific types of investment by
influencing the lending policy of banks.
(c) the value of Non Performing Assets held by
2. They can be used to protect the interests of
the banks
certain ill-organized sectors of the economy,
(d) investment options offered to the customers
whose credit needs are not satisfied by
by the banks
existing institutions.
Which of the statements given above is/are
43. Consider the following statements with reference correct?
to the types of currency: (a) 1 only
1. Hard currency is widely accepted around the (b) 2 only
world as a form of payment for goods and (c) Both 1 and 2
services (d) Neither 1 nor 2
2.  Soft currency mostly exists in developing
countries with relatively unstable 46. With reference to Long Term Repo Operations
governments. (LTROs), consider the following statements:
3. Both hard currency and soft currency are less 1. It is a monetary policy tool by which the RBI
likely to lose value over time. lends money to banks for one to three years
at the current repo rate.
Which of the statements given above are correct?
2. It enables banks to reduce their marginal cost
(a) 1 and 2 only
of funds-lending rate without reduction in
(b) 2 and 3 only
policy rates.
(c) 1 and 3 only Which of the statements given above is/are
(d) 1, 2 and 3 correct?
(a) 1 only
44. Consider the following statements with reference (b) 2 only
to the Incremental Cash Reserve Ratio (I-CRR): (c) Both 1 and 2
1. It is a monetary policy tool used by central (d) Neither 1 nor 2
banks to manage liquidity in the banking
47. Which one of the following statements best
system for a short duration.
describes the term “lightweight payments”?
2. It helps to control the situation of liquidity
(a) Transactions on which heavy fees and charges
overhang in the economy.
are levied
Which of the statements given above is/are (b) Payment system that can be operated from
correct? anywhere by a bare minimum staff
(a) 1 only (c) Securities’ trade that can be done within
(b) 2 only less than 24 hours of the completion of a
(c) Both 1 and 2 transaction
(d) Neither 1 nor 2 (d) The disbursement of payments with the help
of United Payments Interface (UPI)-Lite
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 VAJIRAM & RAVI
48. Consider the following statements: 50. Which one of the following best describes the
Statement-I: positive seigniorage in an economy?
Repo rate is used by the Reserve bank of India (a) The profit earned by the government from
(RBI) to control inflation. printing money.
Statement-II: (b) The central bank charges commercial banks
A decrease in the Repo rate by the RBI increases a higher interest rate for loans to generate
the cost of capital. profit.
Which one of the following is correct in respect of (c) The banks incurs losses due to excessive
the above statements? default of the loans in the market.
(a) Both Statement–I and Statement–II are correct (d) The central bank reduces the supply of money
and Statement–II explains Statement–I in the economy to control inflation.
(b) Both Statement–I and Statement–II are
correct, but Statement–II does not explain
Statement–I
(c) Statement–I is correct, but Statement–II is
incorrect
(d) Statement–I is incorrect, but Statement–II is
correct

49. Consider the following statements:

1. A Nidhi company is engaged in the business
of lending and borrowing with its members
or shareholders.
2. Chit fund companies earn a fixed amount of
the members’ contribution to operate the chit
fund scheme.
3. Both the Nidhi companies and the Chit Fund
companies are part of the NBFC architecture.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

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Test - ET - 02 - Economics